Follow Up

Sarepta Surges on Hopes for Drug

A good clinical trial boosts prospects that eteplirsen can help some boys afflicted with Duchenne muscular dystrophy. And MetroPCS shares jumped on news that it would be acquired by T-Mobile. Why holders should take their money off the table.

News of a favorable clinical trial for the drug, eteplirsen, rocketed Sarepta shares (ticker: SRPT) to $35 from $15.53 last week, giving the company an $800 million stock-market value. Wall Street is betting Sarepta wins accelerated approval from the Food and Drug Administration in 2013 and markets the drug by 2014.

Barron's has written favorably on Sarepta, most recently this past April and August, with the stock around $10. The trial showed that eteplirsen stimulated production of dystrophin in muscle cells. Dystrophin, critical to muscle health, is missing in boys with Duchenne muscular dystrophy. Four boys showed improvement on a six-minute walking test after 48 weeks on high levels of the drug, while those who got a placebo for 24 weeks and eteplirsen for 24 weeks showed a decline in their walking. Thus, eteplirsen might reverse the course of the disease, not just halt its progression.

That result "is astounding, given that boys of this age [about 10 years old] with DMD essentially never show improvement" in the walk test, wrote Wedbush analyst Gregory Wade, in lifting his price target to $70 from $26. He thinks eteplirsen could generate $450 million in peak annual sales.

An estimated 1,800 U.S. boys have the genetic mutation that eteplirsen addresses. Sarepta is working on drugs for two other mutations that affect over 1,000 boys here. CEO Chris Garabedian says his model is
Alexion PharmaceuticalsALXN 3.2936507936507935%Alexion Pharmaceuticals Inc.U.S.: NasdaqUSD130.15
4.153.2936507936507935%
/Date(1481302480152-0600)/
Volume (Delayed 15m)
:
647808
P/E Ratio
79.80981595092024Market Cap
28255248138.4277
Dividend Yield
N/ARev. per Employee
997142More quote details and news »ALXNinYour ValueYour ChangeShort position
(ALXN), which focuses on rare diseases and has a $23 billion market value. Sarepta has a long way to go, but that goal no longer seems unreachable.

Barron'swrote favorably on MetroPCS in 2010, noting that the company could be deal bait for a larger competitor ("MetroPCS Makes the Right Calls," May 17, 2010). The shares are up 45% since then, compared with a 29% gain for the Standard & Poor's 500.

We think readers should hang up on the stock. Sure, a higher bid could come in, but longer term Kevin Smithen of Macquarie Capital doesn't think the deal with T-Mobile that's currently on the table looks promising. "You can't make soup with two leaky pots," he wrote in a report last week.